Personal Income Stays Unchanged, Personal Spending Beats Expectations

Personal income came in unchanged, at 0.0%, when economists were expecting a 0.2% bump.

Personal spending slowed to 0.4% from a revised 0.6% in November, but beat economist expectations for 0.2%

"Weakness in hours and earnings in the employment report pointed to lower wage and salary income, and slowing farm income support payments are also likely to be a drag again, so overall personal income should be little changed," Morgan Stanley's Ted Wieseman wrote clients ahead of the report.

"Meanwhile, the surprisingly strong 0.7% gain in core ex auto retail sales and a modest expected gain in services should offset the pullback in unit auto sales to leave consumer spending a bit higher," he wrote.

"With real incomes after tax down 0.2%, the saving rate dropped to 3.9% from 4.3%, hitting its lowest levels since Jan," Pantheon's Ian Shepherdson wrote after the report. "The downward trend in savings cannot continue; we believe the Q4 decline was due to people spending unexpectedly high cash balances resulting from lower spending on energy in Q3. Savings will rebound in Q1. Even with better income - Dec was hit by the weather - we look for real spending to slow to 2-2.5% from 3.3%."

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